In Business World Are you an ecommerce business owner who is looking to get the most out of your KPIs? KPIs (Key Performance Indicators) are a crucial part of any business. They are a great way to measure and track the success of your business but only if you know how to use them correctly.
Most businesses are not using KPIs to their full potential and are missing out on valuable insights that could help them improve their bottom line. After all, your ecommerce business is likely to be driven by metrics and data, and you need to know the best way to use ecommerce KPIs.
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Below are 7 Tips on how to use eCommerce KPLs
1. Tie them to Your Annual Financial Goals
Financial goals are the backbone of any business. Without financial goals, it would be difficult to track progress and growth. ecommerce businesses are no different. Your KPIs should always be tied to your annual financial goals. As an ecommerce business owner, you need to be aware of the different types of ecommerce KPIs and how to use them to achieve your annual financial goals.
Some of the important ecommerce KPIs that you should track include:
- Revenue
Revenue in ecommerce refers to the total amount of money that you have generated from sales. It directly reflects the success of your business.
- Customer acquisition costs
Customer acquisition costs (CAC) refer to the amount of money that you spend to acquire new customers. It helps you track the efficiency of your marketing and sales efforts. If your CAC is too high, it means that you are spending too much money to acquire new customers. Therefore, you need to find ways to reduce your CAC.
- Lifetime value of a customer
The lifetime value of a customer (LTV) is the total amount of money that a customer spends on your products or services throughout their lifetime and it helps you track the profitability of your customer relationships. If your LTV is high, it means that you are making a lot of money from each customer. Therefore, you should focus on retaining your existing customers and acquiring new customers with a high LTV.
- Conversion rate
Conversion rate is the percentage of visitors to your website who take the desired action, such as making a purchase. It helps you track the success of your marketing and sales efforts. If your conversion rate is low, it means that you need to find ways to improve it.
- Average order value (AOV)
This is the average amount of money that a customer spends on each order. It helps you track the spending habits of your customers. If your AOV is low, it means that you need to find ways to increase it.
- Churn rate
Churn rate is the percentage of customers who stop doing business with you for a while. It helps you track customer satisfaction and loyalty. If your churn rate is high, it means that you need to find ways to improve customer satisfaction and loyalty.
2. Have a Hypotheses Written Down on How to Impact Your KPIs
For each hypothesis, you should have a measurable KPI that you can track. This will help you determine whether or not your hypothesis is correct.
Some examples of hypotheses that you can test include:
- If we increase our marketing budget, we will see an increase in sales.
- we improve our website design, we will see an increase in conversion rate.
- If we offer free shipping, we will see an increase in the average order value.
3. Make Sure They Can Be Tracked Automatically
Investing in a system that can automatically track your KPIs can save you a lot of time and effort. Tracking KPIs is the best way to use ecommerce KPIs to your advantage. With the right system in place, you can focus on other aspects of your business, such as growing your customer base and expanding your product offerings. There are many software platforms that you can use to track your KPIs automatically.
4. Make Sure Everyone Has Access
Creating a system where everyone is granted access and knows what to do with the data will help you make the best use of your ecommerce KPIs. Make sure that you have a plan in place for how to act on the data. For example, if you see that your conversion rate has increased, you should take steps to improve it even further. If you see that your customer acquisition costs are too high, you should find ways to reduce them.
5. Check Them at Least Daily and Test “Why” Changes Happen
The best way to use ecommerce KPIs is to check them at least once a day. This way, you can quickly react to any changes that occur. You should also try to test the “why” behind any changes that you see. For example, if you see that your conversion rate has increased, you should try to determine the reason why. Maybe you implemented a new marketing campaign that is working well. Or maybe you made a change to your website design that is increasing conversions.
By testing the “why” behind changes, you can learn what works well and replicate those results.
6. Limit them to Only the Most Important
There are thousands of different KPIs that you can track. However, you should only focus on the most important ones. Trying to track too many KPIs can be overwhelming and it can be difficult to determine which ones are important. Instead, focus on a few key KPIs that will have the biggest impact on your business. For example, if you’re a startup, you might want to track customer acquisition costs and conversion rates. If you’re a mature company, you might want to track average order value and customer lifetime value.
7. Switch out Irrelevant KPIs
As your business grows and changes, you might find that some of your KPIs are no longer relevant. Switching out the irrelevant ones is the best way to use ecommerce KPIs. For example, if you start selling products online, you might want to track website traffic and conversion rates. But if you stop selling products online, then those KPIs are no longer relevant.
Bottom Line
The above tips are the best way to use ecommerce KPIs to grow your business. KPIs are a valuable tool that can help you track your progress and make decisions about where to focus your efforts. Every ecommerce business is different, so make sure to focus on the KPIs that are most relevant to your business and don’t forget to track them.